Proposition 67

Background

Emergency Telephone Number Surcharge

Currently, telephone service customers in
California
pay a monthly surcharge that supports the state’s 911 emergency telephone
number system. Under current law, the surcharge rate can be set up to 0.75 percent
of a customer’s monthly bill for telephone services for calls made within the
state. The surcharge applies to each separate telephone bill a customer may
receive. The state has currently set the surcharge rate at 0.72 percent.

Revenues from the surcharge are deposited into the State
Emergency Telephone Number Account (911 Account), which is available for
expenditure upon appropriation by the Legislature. The revenues are used to
reimburse government agencies and telephone companies for equipment and related
costs associated with
California
's 911 emergency telephone number system. Due to an increase in the number of
cellular phone accounts, the 911 Account has maintained a reserve that has
ranged from $15 million to $80 million in recent years. The revenue
received from the surcharge in 2002-03 was $139 million. The Department of
General Services and the Board of Equalization are responsible for administering
the 911 Account.

Proposition 99

The Tobacco Tax and Health Protection Act (Proposition
99, enacted by the voters in 1988) assessed a $0.25 per pack tax on cigarette
products that is allocated for specified purposes. In 2004-05, the state is
projected to receive approximately $334 million in Proposition 99 revenues.
Because the number of tobacco users is declining, this funding source has and
will likely continue to decrease. Currently, the state utilizes Proposition 99
funding for a number of health-related purposes, including tobacco education and
prevention efforts, tobacco-related disease research, environmental protection
and recreational resource programs, and health care services for low-income
uninsured persons.

Uncompensated Emergency Medical Care

Under state and federal law, any person seeking emergency
medical care must be provided that care regardless of his or her ability to pay.
As a result, hospitals and physicians who provide emergency and trauma care are
often not fully compensated for the care they provide. The amount spent today by
physicians and hospitals on uncompensated emergency medical care is not known.
Physicians and hospitals reported that, in 2000-01, their cost for this care was
approximately $540 million. However, this estimate may be low because physicians
and hospitals may have underreported the cost of the care that they provided.

Some of the cost of this uncompensated care is partly
paid from various state and county government sources. For example, the state
currently budgets about $32 million in Proposition 99 funds to help
pay for uncompensated medical care provided by physicians and community clinics.

Also, under existing law, each county is allowed to
establish a Maddy Emergency Medical Services Fund (Maddy Fund) made up of
specified revenues from criminal fines and penalties. Counties may use up to 10 percent
of these revenues for the cost of administering the fund. After these costs have
been deducted, 58 percent of the remaining funds are to be used to
reimburse physicians for uncompensated emergency and trauma care, 25 percent
to reimburse hospitals for such care, and 17 percent for other emergency
medical services such as regional poison control centers.

Even with these funds, hospitals and physicians generally
are not compensated for all of the emergency and trauma care that they provide.

Proposal

New State Revenues

This measure increases funding for the reimbursement of
physicians and hospitals for uncompensated emergency medical care and other
purposes. It does this by imposing an additional 3 percent emergency
telephone surcharge, in addition to the existing surcharge, on bills for
telephone services for calls made within the state. Long-distance services for
calls to areas outside of
California
would not be affected by this measure. The surcharge paid by residential
customers would generally be limited to 50 cents per month for each telephone
bill they receive. The surcharge would not be imposed on low-income residential
customers eligible for lifeline telephone services. However, the 50 cents per
month limit would not apply for cellular telephone services or for commercial
telephone lines. Revenues from the increased surcharge would be deposited into a
new 911 Emergency and Trauma Care Fund established by the measure. Certain state
agencies specified in the measure would be able to expend the funds without
appropriation by the Legislature.

Existing State and Local Funds

In addition to providing the new revenues, this measure
would affect the distribution of certain existing state and local funds for
uncompensated medical care.

First, the proposition requires each county to establish
a Maddy Fund and transfers a portion of fund revenues to the state for the
reimbursement of each county’s emergency physicians. While the purpose of
these funds would remain the same, this measure would generally shift the
administration of the money from counties to the state. However, under this
measure, acounty could apply for and
obtain permission from the state to administer certain accounts in its Maddy
Fund.

In addition, this measure requires that the state
continue to spend about $32 million per year in Proposition 99 funds to
reimburse physicians and community clinics for uncompensated medical care.

How the Funding Would Be Spent

New
State Revenues. Most of the additional revenues generated by this
measure would be used to reimburse physicians and hospitals for uncompensated
emergency and trauma care. The remaining portion of the funding would be used to
improve the state’s emergency phone number system, to help train and equip
“first responders” (such as firefighters and paramedics) for emergencies,
and to support community clinics. Below is a more detailed description of the
funding distribution, the purpose of those funds, and how they would be
administered. (The percentage of new funds distributed for each purpose is noted
in parentheses.)

The 911 Account funding
(0.75 percent of the new revenues) would be used to make technological and
service improvements to the basic emergency telephone number system. Under the
measure, the Department of General Services would distribute the funds to state
or local agencies.

Emergency
and Trauma First Responders Account funding (3.75 percent)would be allocated to the California Firefighter Joint Apprenticeship
Training Program for training and related equipment for firefighters,
paramedics, and other first responders. The Office of the State Fire Marshal
would administer this funding.

Community
Clinics Urgent Care Account funding (5 percent) would be allocated to
nonprofit clinics providing urgent care services to the uninsured. The Office of
Statewide Health Planning and Development would administer this funding.

TheEmergency
and Trauma Physician Uninsured Account funding (30.5 percent) would
be used to reimburse claims filed by physicians who are not employed by
hospitals and who provide uncompensated emergency services to patients. The DHS
would administer these funds.

TheEmergency
and Trauma Hospital Services Account funding (60 percent)would reimburse hospitals for the cost of uncompensated emergency and
trauma care. The funding would be administered by the Department of Health
Services (DHS).

Existing
State and Local Funds. Additionally, the measure would establish the Emergency and Trauma Physician Unpaid Claims Accountand would shift 58 percent of penalty assessments now
being collected by
county
Maddy
Funds to this new state-administered account. These funds would be used to
reimburse physicians for uncompensated emergency medical care.

Both the Emergency and Trauma Physician Unpaid Claims
Account and the Emergency and Trauma Physician Uninsured Account would be
administered by DHS, but a county could apply for and obtain permission to
administer the funds allocated from these accounts within its
jurisdiction. The
Emergency and Trauma Physician Services Commission, consisting of ten emergency
medical professionals, would be created in DHS to provide advice on all aspects
of these accounts as well as to review and approve relevant forms, guidelines,
regulations, and county applications to administer funds from these accounts.

Fiscal Effects

New
State Revenues and Expenditures. Based upon the expected number of
telephone customers and accounting for the cap on residential charges, we
estimate that the measure would raise about $500 million in additional annual
revenues from the increased surcharge. This amount would probably grow in future
years with increases in telephone users and the number of calls made within the
state. State expenditures would grow in keeping with these new revenues. Figure
1 shows how the new funds would be distributed assuming increased revenues of
$500 million annually.

Figure 1

Proposition 67
Estimated Distribution of New Revenue
From Surcharge Increase

(In Millions)

Account

Estimated
Revenue

911 Account

$4

Emergency and Trauma First Responders Account

19

Community Clinics Urgent Care Account

25

Emergency and Trauma Physician Uninsured Account

153

Emergency and
Trauma
Hospital
Services Account

300

Totala

$500

aTotal may not sum to $500 million due to rounding.

Impact
on Existing State and Local Funds. Based on the most recent data
available, we estimate that this proposition would transfer about $32 million
each year to the state from the county Maddy Funds to reimburse physicians for uncompensated emergency care.

The measure also requires that about $32 million per
year in Proposition 99 funds continue to be provided to reimburse
physicians and community clinics for uncompensated medical care. While this
would provide fixed ongoing revenues for these purposes, it would also mean that
future funding for other programs which now rely on Proposition 99
revenues, would have to be reduced or alternative sources of funding found as
tobacco tax revenues decline.

State
and Local Administrative Costs. This measure would result in increased
onetime and ongoing state administrative expenditures of several million
dollars. Generally, these costs would be paid by the additional revenues
generated under this measure.

The measure would also result
in minor administrative expenditures at the local level, that would be paid for
by the revenues deposited into those accounts.